AOL Email Settlement Moves Forward

A federal judge has granted
preliminary approval to a deal calling for AOL to donate around $100,000 to five organizations, including the Electronic Frontier Foundation and Information Technology and Innovation Foundation, in
order to settle class-action litigation about ads in emails.

If approved, the deal will resolve two class-action lawsuits by AOL members that complained about the company's former practice
of placing ads in footers of emails. One lawsuit alleged that the ads were "annoying, confusing, intrusive and misleading," while the second alleged that the ads violated a federal privacy law.

AOL began inserting the footers in 2006. Two years later, the company decided to allow paying subscribers to opt out of the ads. The following year, AOL changed its policy to allow everyone to
opt out of the ads. The settlement agreement allows AOL to start sending the footers again, but only if the company also provides opt-out links to all members.

A prior settlement agreement
-- which also called for AOL to make donations to nonprofits -- was rejected in 2011 by the 9th Circuit Court of Appeals. The appellate court ruled at the time that the organizations designated as
recipients were inappropriate because they didn't deal with Internet issues.

The appellate court returned the case to the trial court, where U.S. District Court Judge Christina Snyder in
the Central District of California quietly granted the new deal tentative approval several weeks ago. Snyder will hold a hearing in late December about whether to finalize the settlement.

The current agreement also calls on AOL to donate $37,500 to the EFF and the same amount to the ITIF. The deal requires the company to donate $8,750 each to three other groups that were chosen by
the individual Web users who sued: the New Roads School of Santa Monica, Oklahoma Indian Legal Services and the Friars Foundation. The settlement agreement also provides for around $320,000 in fees to
the consumers' attorneys.

Internet legal expert Venkat Balasubramani says the new agreement appears to address the concerns that spurred the 9th Circuit to reject the earlier settlement.
That's because the agreement now calls for donations to groups that deal with Internet policy. “I would assume, as revised, this settlement would pass muster,” he says in an email to
Online Media Daily.

The AOL litigation appears to mark the first significant federal challenge to the practice of monetizing emails with ads. Because the case was settled, it's not
clear whether Web companies violate any privacy laws by placing ads in or around emails.

Google and Yahoo currently face lawsuits for allegedly violating the wiretap law by scanning emails
in order to surround them with contextual ads.